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Residual Income - What It Is And Why You Need It


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Residual Income - What It Is And Why You Need It

  1. 1. Residual Income - What It Is And Why You Need ItAs you surf the net, you will come across a wide variety of business opportunities. Invariably, eachone will claim to have the best compensation plan available and many will claim to offer "residualincome". However, a cursory examination of many of these pay plans will reveal that, although theremay be a very real earning opportunity, it cannot truly be described as residual income.What exactly is residual income anyway? Simply put, residual income can be defined as any paymentsystem where you receive regular, ongoing payments as a result of a single sale. The frequency ofthe payments may vary - they could be weekly, monthly, quarterly etc. - but they are regular andongoing with no further selling activity once the initial sale has been made.Some potential residual income opportunities are listed below:• Telephone calls and line rental• Mobile phone supply, line rental and calls.• Electricity supply.• Gas supply.• Web hosting supply.• Autoresponder supply (monthly rental).• Any software which is supplied based on a rental basis.• Property rental.These are just a few examples, there are plenty more. Any product or service which is provided on alease or rental agreement has the potential to provide you with residual income. Ideally, yourcustomer will automatically renew each week/month without any requirement for action (effort) byeither your or your customer.There may also be some scope for residual income with disposable or consumable products. In thiscase, the mechanics of the reorder process have a critical bearing upon your earning capabilities. Fortrue residual income, the reorder process should be automatic as described above. This is not simplya matter of semantics or a pedantic definition. There are several reasons why you should targetgenuine residual income.Many people who set up their own small home business do so with the express intent of eventuallyreplacing their salary. Due to the regular nature of the payments, residual income is ideal for this. Infact, its considerably better than having a salary as you continue to get paid for work that was done inthe past.With genuine residual income, the automated reorder process means that you dont have to spendtime servicing and supporting your existing customers. You can focus your energies on finding newcustomers and/or recruiting new distributors/affiliates, thereby continually growing your business atthe fastest possible rate.If your customer needs to take some action to reorder then, even with a consumable product thatneeds to be replenished periodically, there is a "break point" in the process. The customer maydecide to economise and do without the product that month, they may decide to use one of your
  2. 2. (many) competitors or they might just simply forget to order.With an automated reorder system on the other hand, your customer needs to make a positive effortnot to reorder. Its a well known fact that customers who pay for products and services by subscriptionare much more loyal and less likely to cancel. Even if they do decide to opt out they tend to delay thisfor longer than they would otherwise.Think about it for a moment. Have you ever kept a subscription running for longer than you intended,or do you know someone else who has? Perhaps you might even have some small but regularsubscription running right now that youve completely forgotten about.That, of course, is the reason why many companies will give you a reduction in the standard rate ifyou set up a subscription agreement. Readers digest know the value of this. So do telephonecompanies, electricity companies, internet service providers and software providers around the world.Now you know about it too - take advantage if you possibly can.Finally - and lets not kid ourselves here - many people dont like selling. There are ways round thisand its possible to minimise the discomfort some people feel - but its still there at some level formany of us.Picture the scene. Youve just made a sale, you feel great and youre already thinking about howyoure going to spend you hard earned money. Then it hits you - youve got to do it all again thisafternoon, tomorrow, next week. Takes the gloss off a bit - right?Now think about a slightly different scenario. Youve just made a sale. Your new customer has signeda repeat subscription agreement and you are going to benefit for months, if not years to come. Is thata better home movie? I think it is.There are other benefits of residual income but, for the sake of brevity, I hope that those alreadydiscussed above provide sufficient compulsion for you to actively seek out at least one residualincome stream.To summarise, genuine residual income will help you maximise the returns on your efforts and build asolid, reliable and predictable income from your home business. You need it.what is residual income